Survey finds 29 per cent of SMEs claim they are an insolvency risk if they lose a major client

A twice yearly survey of Australian small businesses has painted a disturbing picture in which almost 30 per cent say they are at risk of insolvency.

ScotPac’s report shows a record “confidence gap” in six-month revenue growth forecasts between optimistic and pessimistic businesses.

Despite many small and medium businesses looking forward with optimism, a large portion remains under siege with more than a quarter claiming the loss of a key client or supplier would put them at risk of insolvency.

The latest edition of non-bank lender ScotPac’s biannual SME Growth Index Report showed a record “confidence gap” in six-month revenue growth forecasts between the most optimistic and pessimistic businesses.

The survey of found 56 per cent of respondents forecast average revenue growth 9.3 per cent, while 34 per cent had a new record negative revenue projection of minus 12.6 per cent.

It found 94 per cent of SMEs said they required new funding in the next six months. However, nine out of 10 were feeling the pinch from the trifecta of new ­national minimum wage rates, award increases and a further hike in the superannuation guarantee.

Escalating cost pressures and an increasingly aggressive Australian Taxation Office – which is chasing $35bn of small business debt – is taking a toll, with 29 per cent of small businesses saying they were at risk of insolvency if they lost a major supplier or client.

In addition, the report found half of the 700 SMEs surveyed with annual revenues of $1m and $20m claimed that if they lost a client or major suppliers they would suffer severe cashflow problems or face negative financial impacts lasting three months or more, while 4 per cent said they would need to shut down immediately. Only 21 per cent felt secure enough in their business diversity to weather the loss of a major supplier or client without financial damage.

The survey found 29 per cent of businesses said they were at risk of insolvency if they lost a major supplier or client.

ScotPac chief executive Jon Sutton said the economic indicators were raising concerns. “In the current high-cost environment, SMEs are understandably nervous about disruptions to their cashflow and supply chains, particularly those operating on thin margins,” he said.

“SMEs that sit down regularly with their brokers and make plans for unforeseen events like the loss of a key client or supplier will be well-prepared to survive cashflow fluctuations.

“Even for businesses placed into administration, the benefits of sourcing professional help are now clearly documented.”

According to the Australian Securities & Investments Commission, in the 2024 financial year 11,053 businesses went insolvent nationwide, a 39 per cent jump from the previous year. Court-­ordered liquidations soured 99 per cent and director penalty notices rose by 50 per cent. The ATO issued almost 27,000 director penalty notices in FY2024 for $4.4bn in outstanding payments.

It has been forecast to be worse in the 2025 financial year, with 12,405 business collapsing between January and November this year.

Mining remained the most positive sector nationally, with an average forecast revenue increase of 5 per cent, ahead of transport (3.5 per cent) and business services (2.5 per cent).

SMEs in construction again held the most pessimistic expectations of revenue growth (-6 per cent), while those in the manufacturing sector were also fore­casting a gloomy short-term picture (-2 per cent).

Despite the distraction of a state election in October, 84 per cent of Queensland SMEs were projecting revenue growth in the next six months, with 9 per cent expected a decline. WA SMEs also remain upbeat, with 84 per cent forecasting revenue growth.